Contracts Flash Cards

Aunt gives nephew a promissory note for $3000. Not legally enforceable because it is a gift promise.

Husband promises to pay $200 to each of the people whom his deceased wife promised money in her will in exchange for one cent from them as nominal consideration. Nominal consideration creates an unconscionable contract. Later on, Restatement 2: rejects nominal consideration as a general principle, but does provide that nominal consideration makes a promise enforceable in two specific areas-- options and guarantees (This is not adopted in all modern cases, though...some say nominal consideration is sufficient to make a binding contract)

A brother-in-law's offer to sister-in-law to come move to his land is a mere gratuity and is not cause for consideration. (However, if sister-in-law relied on this promise...)

A legal claim or defense that turns on a misstated and relied upon fact will succeed generally may not be based on a misstatement of intent or a misstatement regarding the future.

(Restatement First, Section 90) A promise which the promisor should reasonably expect to induce action or forbearance of a definite and substantial character on the part of the promisee and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise (Reliance is treated as either consideration itself or as a substitute for consideration)

P is a former employee of D company. D contracted to pay her $200 per month for life upon her retirement, as per a resolution passed by the Board of Directors. After the company President died, the new President questioned the binding nature of this resolution. The agreement was binding due to promissory estoppel and reliance creating consideration. "Having intentionally influenced P to alter her position for the worse on the faith of the note being paid when due, it would be grossly inequitable to permit the maker, or his executor, to resist payment on the ground that the promise was given without consideration."

Similar case to Feinberg, but P had previously intended to retire when he was promised payments by an officer of the company. Thus, this was insufficient to meet the requirements of reliance under the doctrine of promissory estoppel.

Son of D was ill and taken care of by P. D wrote letter to P promising to pay him the expenses of his son. D is not liable for the expenses because there was no consideration for P's past actions. "The general position that moral obligation is a sufficient consideration for an express promise, is to be limited in its application, to cases where at some time or other a good or valuable consideration has existed." The only situations in which a promise to discharge an unenforceable obligation is binding: 1) minor who reaffirms promise as an adult 2) reaffirmation of intention to pay after statute of limitations runs out 3) reaffirmation of intention to pay creditors after one is declared bankrupt

P saved D from death and D promised to take care of P financially because P was injured as a result. When D died, his family said there was no enforceable contract because there was a lack of consideration. It was just a gift promise. Yes. Because P saved D from death or serious bodily harm, and D subsequently agreed to pay him for the service rendered, it became a valid and enforceable contract. Held for P. where the promisee cares for, improves, and preserves the property of the promisor, though done without request, it is sufficient consideration for the promisor's subsequent agreement to pay for the service, because of the material benefit received. This is a quasi-contract: a promise to pay for an unrequested benefit should be enforced if an obligation exists to pay for the benefit under the law of unjust enrichment independent of the promise

An uncle promised his nephew $5000 if he refrained from "drinking, using tobacco, swearing, and playing cards or billiards for money until he became 21." Uncle died before giving nephew his money. Uncle's estate argued contended the contract was without consideration because refraining from these activities actually benefited P. Held for P. courts will not ask whether the thing which forms the consideration does in fact benefit the promisee because they do not question the adequacy of consideration. Any damage, or suspension, or forbearance of a right will be sufficient to sustain a promise.

a promise to give up smoking may be a benefit to the promisee's health, but it is also a legal detriment and sufficient consideration to support a contract

P, a Greek-American, was in Greece during WW2 and needed money, so she promised to give D $2000 American dollars to D after the war in exchange for him giving her 500,000 drachmas immediately (which was only valued at $25). After the war, she sued because of the inadequacy of the consideration. Held for D. Mere inadequacy of consideration will not void a contract. Also, the 500,000 drachmas to P during wartime WAS very valuable.

A bargain made under duress: A whaling ship ran aground with a lot of whale oil. Three ships came to rescue and one of these captains told the captain of the aground ship, Richmond, to hold an auction for the oil. He did so, selling it for much less than the typical price. Upon being rescued and returned to the mainland, the owners of the Richmond sued for their oil to be paid for at a better price. The court held for the owners because "the contrivance of the auction sale, under such circumstances, where the master of the Richmond was hopeless, helpless, and passive...where one party had absolute power, and the other no choice but submission where the vendor must take what is offered or get nothing- is a transaction which has no characteristic of valid contract."

Unconscionability: P bought a lot of furniture from D over the years, but defaulted on a payment so D sought to "replevy" all the items P had purchased, due to a cross-collateral clause in the furniture lease agreement where there was always a remaining balance on a previous purchase. Many of the plaintiffs were poor and D knew this. P argued that the contracts were unconscionable. Held for P. The District of Columbia Court of Appeals ruled that the lower court could rule the contract unconscionable and refuse to enforce it, and returned the case to the lower court to decide whether or not the contract was in fact unconscionable. Where the element of unconscionability is present at the time a contract is made, the contract should not be enforced. (language from UCC § 2-302)

An absence of meaningful choice on the part of one of the parties together with contract terms which are unreasonably favorable to the other party. Test of unconscionability: whether the terms are "so extreme as to appear unconscionable according to the mores and business practices of the time and place."

There was a contract for the purchase and installation of residential carpeting. The issue was whether the contract was governed by the UCC because the contract involved both a good, the carpet, and a service, the installation. Use the predominant factor test as it is easier than severing the transaction into separate provisions. The sale of the carpet was the predominant factor in the contract and so the UCC was applicable to the subject transaction.

Appellate court found P had failed to establish an agency between National and Fidelity and so could not defeat D's motion for summary judgment on grounds of novation. However, S.C. failed to see the relationship between establishing agency and defeating a claim of novation or pursuing a claim of unconscionability. By analyzing a history of the relationship and distinctions between procedural and substantive unconscionability, the court found that at least substantive is necessary to overcome a claim of novation. (procedural may be better addressed through tort law: fraud, etc) procedural/process unconscionability: concerned with "unfair surprise", fine print clauses, mistakes or ignorance of important facts or other things that mean bargaining did not proceed as it should substantive unconscionability: unjust or one-sided contract concerns the actual terms of the contract and examines the relative fairness of the obligations assumed

P negotiated a two-year contract for sale of keyboards with D. P agreed to order a minimum of 1000 units per year and D agreed to supply P with up to 2000 units per month plus the accessories for those units. A month later, P decided to expand to purchase chairs from D as well. A new contract was formed. . However, D later informed P that they would not be able to supply them with 2,480 chairs because P was planning to sell them to restricted countries. P sued for breach of contract to supply chairs. Held for D because D agreed to fill orders as made by P, but P had no obligation to place any orders at all. In a contract where the parties exchange promises of performance, if either of those promises is illusory or unenforceable then there is no consideration for the other promise. So, if one of the promises appears on its face to be so insubstantial as to impose no obligation at all on the promisor- who says, in effect, "I will if I want to," then that promise may be characterized as an illusory promise...which does not constitute consideration. HOWEVER this case contains errors because illusory promises are still unilateral contracts and may have consideration as "bargained for chances" to do business or as modifications. The court said ASAL didn't promise anything new, but Pavilion did so there was no consideration. YET, UCC 2-209 says "an agreement modifying a contract within this Article needs no consideration to be binding." p. 35

do not shrink the boundaries of B's realm of choice in an agreement with A. However, B's commitment does have costs because choosing to exchange with one trading partner rather than another is not cost free.

D, a fashion designer, signed an agreement with P giving him the exclusive right to place her endorsements on the designs of others. In return, she would receive one-half of the revenues and profits. P claimed D had placed her endorsements on goods without his knowledge and withheld profits from him. D claimed the contract lacked consideration. Held for P because implied promises count towards a contract. It was implied that P would be the sole marketer of D's designs. Without P's implied promise, however, the entire deal would be illusory. Implied promises are enforceable, provided that the proof is clear that they are implied.

Legal duty rule. D agreed to pay P, a special police officer, $500 if he could procure for her the names and addresses of the thieves who had stolen her diamonds. D cannot recover $500. The services he rendered in this instance must be presumed to have been rendered in pursuance of his public duty as an officer and for its performance he was not entitled to receive a special quid pro quo.

P contracted with D to build his brewery. When P heard that D had chosen a different refrig. company than the one owned by P for the building, P refused to complete the work. However, D promised P that he could have 5% on the cost of the ice machine if he would resume work as architect. P accepted and the brewery was completed, but D later refused to pay the extra 5% to P. Held for D. The additional offer by D was without consideration because he was already bound by his contract to design and supervise the building and so any extra payments to induce him to maintain his commitments are without merit.

D owed P money, but the parties agreed that if D paid P 500 pounds at once, and the remainder of the principal in certain installments, P would forgive the interest on the debt. P sued D for the interest on the debt, alleging that any agreement to forgive the interest was without consideration since the consideration consisted only in D's doing what he was already bound to do in paying the principal of the debt. Bound by precedent, the court grudgingly held for P. What the law implies as a duty is no consideration.

P sued D to recover damages for breach of contract, but D counter-sued for damages from being forced to enter into a subcontract for Navy parts w/ P under duress during wartime. Held for P. D was at no time under any immediate urgency or government pressure for deliveries under the Navy contract. They were laying an intentional basis for a cause of action through submitting letters to P. Also, one cannot recover for economic duress without establishing that his normal legal remedy for the breach would be inadequate or ineffectual in the situation in which he finds himself and that no other means of immediate relief is available to him. Because D did not look for other sources for its product, it cannot recover. (This is reversed in High Court Decision)

A reversal of the appellate division's decision. After contacting 10 manufacturers and finding none who could produce the parts in time to meet commitments, D acceded to P's demands. After last delivery of second subcontract in 1967, D notified P of intention to recover the price increases. Held for D. The evidence makes out a classic case of economic duress. P's threat to stop deliveries unless the prices were increased deprived D of its free will. Unreasonable for P to contend that D should have contacted Government to extend its delivery dates. Also, D DID contact 10 approved vendors but found that none would be able to provide them with goods as quickly as P could, so they were forced to go with P. No choice but to take the contract and then sue to get excess back. Modifications are binding w/o consideration, except when the modification is not fair or equitable= Restatement (Second) Section 89

D was a garbage collector who entered into a 5-yr contract w/ the city, but after a lot of new residents moved in, he required additional payment to accommodate his services. City council granted him this money but then a group of taxpayers sued for the money back b/c there was no consideration for this modified contract. Held for D because of Restatement 89: the modification of a contract does not require its own consideration if the modification was made in good faith and was voluntarily accepted by both parties. Exception to the preexisting duty rule where performance of a duty is consideration. Also, UCC 2-209 states: "an agreement modifying a contract for the sale of goods needs no consideration to be binding."

Satisfaction clauses are acceptable means of consideration. Where P promises to pay debt immediately in exchange for D's promise to accept a lesser amount, there is consideration between both parties. Both sides suffer a detriment and are benefited.

Stipulation to P's total abstinence was not the consideration the publishing contract hinged upon, but one of the many conditions. Therefore, this condition could be waived. If it is waived, then the full payment ($6 per page) should be instated. The court ruled that if D had given P a waiver, P could recover, but the trial court has to decide whether the facts prove that a waiver existed.

D was married but began a relationship with P that lasted over a year. During that year, P became pregnant and D urged her to have an abortion in exchange for his promise that in a year, she could have his child. Even if they weren't together in a year, he would conceive a child with her by artificial insemination. D later refused to impregnate her. The court ruled that there was no contract because the court does not like to supervise the promises made between two consenting adults as to the circumstances of their private sexual conduct.

Agreements entered into at the time in vitro is commenced are enforceable and binding on the parties, subject to the right of either party to change his or her mind about disposition up to the point of or destruction of any stored embryo. At that point, there must be a signed authorization of both donors, under the req. of contemporaneous mutual consent, in order to transfer, release, dispose of, or use embryos.

Calculated by the contract market differential (general damages)= the difference between the contract price and what you would have to pay in the marketplace to get equivalent goods This is the normal contract damage rule; gains unrealized plus losses caused =GULC (prospective damages)

Damages awarded to someone who has foreseeably relied on an ordinarily unenforceable promise.

Damages awarded to a plaintiff when the defendant has been unjustly enriched at the plaintiff's expense.

P sought surgery to remove his scar tissue on his palm and graft skin taken from his chest in its place. D performed the surgery after repeatedly soliciting the opportunity from the father to perform it. This was a case for damages for breach of express warranty, so the measure of damages should be the diff. between the value to P of a perfect or a good hand, such as the jury found D had promised him, and the value of his hand in its present condition.

P sued D for breach of contract for selling paperback copies of the Hunt for Red October sooner than stipulated in the contract. As to actual damages deserved by P, P cannot recover $724,300 profits that D received from pre-October sales because these profits do not define P's loss since many people who bought ppback would not have bought hardcover. Thus, the damages of $33,380.50 awarded by D.C. as the profits P would have earned on hardcover sales in September if the ppback had not been offered is more appropriate. In calculating the amount of damages in a breach of contract case, focus on the P's loss, not on the D's gain and remember that the central objective behind the system of contract remedies is compensatory, not punitive

D should not be allowed to retain its gains from a willful breach of contract. This is because D should not be allowed to deprive P of a profit he/she was entitled to make. Disgorgement is the forced giving up of profits obtained by illegal or unethical acts. Disgorgement is the counterargument to the theory of efficient breach